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Care Or Cash? The Effect Of Child Care Subsidies On Student Performance

Many countries have implemented childcare subsidies in an effort to help families; in the United States, the government created the Child Care and Development Fund in 1996, which provides public funds for childcare assistance to low-income families. Despite the importance of the issue, little is known about the effect of childcare subsidies on parent and child outcomes. Research in this area has been limited because of the difficulty identifying the causal effect of childcare price on later outcomes; for example, higher childcare prices may be associated with better childcare or wealthier parents, in which case one cannot isolate the effect of price alone on later child outcomes. This paper uses recent data and a novel source of identifying variation--sharp discontinuities in the price of childcare by income in Norway--to identify the effect of childcare subsidies on parental behavior and the later academic achievement of children. There are a number of papers that have examined the effect of childcare subsidies on female labor force participation, with the findings ranging from no effect to significant negative effects (See Blau, 2000, for a summary). More recently, work by Herbst and Tekin (2010b) has examined the effect of childcare subsidies in the United States on children’s academic performance.1 They use a unique identification strategy, applying distance to the nearest social service agency that administers the subsidy application process as an instrument for subsidy receipt. They find small negative effects of subsidy receipt the year before kindergarten on kindergarten performance, although these negative effects have generally disappeared by third grade.2 Our work complements this

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Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 09/12.

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Length: 54 pages
Date of creation: 30 May 2012
Date of revision:
Handle: RePEc:hhs:bergec:2012_009
Contact details of provider: Postal:
Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway

Phone: (+47)55589200
Fax: (+47)55589210
Web page: http://www.uib.no/econ/en
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  1. Maria Fitzpatrick, 2008. "Preschoolers Enrolled and Mothers at Work? The Effects of Universal Pre-Kindergarten," Discussion Papers 08-001, Stanford Institute for Economic Policy Research.
  2. David S. Lee & Thomas Lemieux, 2009. "Regression Discontinuity Designs In Economics," Working Papers 1118, Princeton University, Department of Economics, Industrial Relations Section..
  3. Philip Oreopoulos & Marianne Page & Ann Huff Stevens, 2005. "The Intergenerational Effect of Worker Displacement," NBER Working Papers 11587, National Bureau of Economic Research, Inc.
  4. Jens Ludwig & Douglas L. Miller, 2007. "Does Head Start Improve Children's Life Chances? Evidence from a Regression Discontinuity Design," The Quarterly Journal of Economics, Oxford University Press, vol. 122(1), pages 159-208.
  5. Samuel Berlinski & Sebastian Galiani & Paul Gertler, 2006. "The Effect of Pre-Primary Education on Primary School Performance," William Davidson Institute Working Papers Series wp838, William Davidson Institute at the University of Michigan.
  6. Janet Currie, 2009. "Healthy, Wealthy, and Wise: Socioeconomic Status, Poor Health in Childhood, and Human Capital Development," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 87-122, March.
  7. Pål Schøne, 2004. "Labour supply effects of a cash-for-care subsidy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(4), pages 703-727, December.
  8. David S. Lee & Thomas Lemieux, 2010. "Regression Discontinuity Designs in Economics," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 281-355, June.
  9. Loken, Katrine Vellesen & Mogstad, Magne & Wiswall, Matthew, 2010. "What Linear Estimators Miss: Re-Examining the Effects of Family Income on Child Outcomes," IZA Discussion Papers 4971, Institute for the Study of Labor (IZA).
  10. Tekin, Erdal, 2002. "Child Care Subsidies, Wages, and Employment of Single Mothers," IZA Discussion Papers 517, Institute for the Study of Labor (IZA).
  11. Tekin, Erdal, 2005. "Child care subsidy receipt, employment, and child care choices of single mothers," Economics Letters, Elsevier, vol. 89(1), pages 1-6, October.
  12. Berlinski, Samuel & Galiani, Sebastian & Manacorda, Marco, 2007. "Giving children a better start : preschool attendance and school-age profiles," Policy Research Working Paper Series 4240, The World Bank.
  13. John Shea, 1997. "Does Parents' Money Matter?," NBER Working Papers 6026, National Bureau of Economic Research, Inc.
  14. Chris M. Herbst & Erdal Tekin, 2010. "The Impact of Child Care Subsidies on Child Well-Being: Evidence from Geographic Variation in the Distance to Social Service Agencies," Working Papers id:2739, eSocialSciences.
  15. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January.
  16. James Heckman & Pedro Carneiro, 2003. "Human Capital Policy," NBER Working Papers 9495, National Bureau of Economic Research, Inc.
  17. Katrine V. Løken & Magne Mogstad & Matthew Wiswall, 2012. "What Linear Estimators Miss: The Effects of Family Income on Child Outcomes," American Economic Journal: Applied Economics, American Economic Association, vol. 4(2), pages 1-35, April.
  18. repec:oup:restud:v:79:y::i:3:p:933-959 is not listed on IDEAS
  19. Løken, Katrine Vellesen, 2007. "Family income and children's education: Using the Norwegian oil boom as a natural experiment," Working Papers in Economics 03/07, University of Bergen, Department of Economics.
  20. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-89, December.
  21. Imbens, Guido W. & Kalyanaraman, Karthik, 2009. "Optimal Bandwidth Choice for the Regression Discontinuity Estimator," IZA Discussion Papers 3995, Institute for the Study of Labor (IZA).
  22. David Blau, 2003. "Child Care Subsidy Programs," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 443-516 National Bureau of Economic Research, Inc.
  23. David Blau & Erdal Tekin, 2007. "The determinants and consequences of child care subsidies for single mothers in the USA," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(4), pages 719-741, October.
  24. David M. Blau, 1999. "The Effect Of Income On Child Development," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 261-276, May.
  25. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-09, January.
  26. Gordon B. Dahl & Lance Lochner, 2005. "The Impact of Family Income on Child Achievement," NBER Working Papers 11279, National Bureau of Economic Research, Inc.
  27. Dan Maurice Levy & Greg Duncan, 2000. "Using Sibling Samples to Assess the Effect of Childhood Family Income on Completed Schooling," JCPR Working Papers 168, Northwestern University/University of Chicago Joint Center for Poverty Research.
  28. Milligan, Kevin & Stabile, Mark, 2007. "The integration of child tax credits and welfare: Evidence from the Canadian National Child Benefit program," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 305-326, February.
  29. Tarjei Havnes & Magne Mogstad, 2011. "No Child Left Behind: Subsidized Child Care and Children's Long-Run Outcomes," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 97-129, May.
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